Medical Device Tax: Goodbye and Good Riddance

Wednesday, 01 February 2017

When the controversial medical device excise tax was introduced more than seven years ago as part of the Affordable Care Act, industry criticized it as a “jobs killer” and predicted that such a tax would essentially wipe out investment in R&D.

Now with a new administration ushering in a more favorable political environment, Congressman Erik Paulsen (MN) has introduced the “Protect Medical Innovation Act,” which would permanently repeal the burdensome 2.3 percent medical device excise tax. The Act was introduced with broad bipartisan support and 221 cosponsors.

In the 114th Congress, a two-year suspension of the medical device tax passed in both the House and the Senate with bipartisan support and was signed by the President.

“As we predicted, the temporary suspension of the tax has led medical technology companies to reinvest funds that would have gone into new R&D, infrastructure improvements, and new hiring,” says Scott Whitaker, president and CEO AdvaMed. “With the suspension set to expire in 2017, for these benefits to continue for the long term, companies need the certainty of permanent repeal to support future job growth and sustainable R&D investment.” Whitaker says a permanent repeal will help ensure a strong pipeline of continued medical innovation for patients worldwide.

Medtech companies are leveraging the 2015 suspension of the medical device excise tax to expand their businesses and investments, according to a new survey from AdvaMed.

The study explored various impacts from the tax’s suspension — from job retention and creation to elevated R&D infusions — and suggests a broad range of strong economic activity. Industry analysts believe, however, greater economic growth would occur with permanent device tax repeal.

“Our members are bullish on future industry growth and job creation, as these numbers indicate,” says Whitaker. “But the one factor that concerns every manufacturer — both large and small — is the continued uncertainty regarding the medical device tax. With congressional action now, we can take the necessary steps to give this economy the shot in the arm it really needs.”

“The current suspension of the tax has allowed medical technology companies to reinvest funds into new R&D, restart delayed projects, build infrastructure, and support new hiring,” says JC Scott, senior executive vice president, government affairs at Advamed. “The sooner this onerous tax is gone for good, the sooner these benefits can be made permanent. That’s crucial for patients and for continued medical innovation.”

Paulsen says repealing the tax protects American manufacturing, spurs innovation, and ensures that the latest and best medical technology is affordable for patients. “We are already seeing new American jobs and increased investment in research and development as a result of the temporary suspension of this tax. With overwhelming bipartisan support in the past, permanent repeal should be a top priority for Congress.”

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